Microsoft Seeks Win2k Boost in Andersen Deal

Microsoft Corp. and Andersen Consulting announced an estimated $1 billion (US$) joint venture today to provide midsize to large-scale customers with e-commerce applications built on the Microsoft enterprise platform and Windows 2000 operating system.

Windows 2000, so far, has reportedly received only a luke-warm reception from Information Technology professionals, due to what some perceive as “bloated” code and excessive complexity. On the other hand, Linux has gained significant momentum in the corporate server market. These two factors contribute to Microsoft’s sense of urgency in boosting Win2000 deployment and, hence, the interest in strategic consultancy partners like Andersen Consulting.

The joint venture calls for the two firms to form a new company called Avanade to deliver Internet-specific platform services based on Windows 2000.

As part of the deal, Andersen Consulting also said it will create an internal organization of approximately 3,000 people dedicated to designing and building solutions based on the Microsoft enterprise platform. The firm announced that it has appointed Karl E. Newkirk, a senior Andersen Consulting partner and former global managing partner for the firm’s Enterprise Business Solutions (EBS) line of business, to head the new organization.

Microsoft added that it will train about 25,000 Andersen Consulting professionals to use its new enterprise platform. Also, Microsoft product groups said it will work with both Andersen Consulting and Avanade professionals as Microsoft develops next generation technologies and platforms.

Second Windows 2000 Consulting Deal in Month

The deal is Microsoft’s second Windows 2000-based alliance with a major consulting firm. Last month, Microsoft announced a deal with the consulting and accounting firm KPMG International to assist companies with every phase of setting up new e-businesses using the Windows 2000 operating system.

Analysts say that such relationships are critical for Microsoft in its long-term battle to become the preeminent operating system provider against Sun Microsystems and various Linux system providers. Consulting firms like Andersen Consulting and KPMG often determine which systems are used as part of their projects.

New Company Starts Up in Seattle Headquarters

The companies said that Avanade will be headquartered in the Seattle, Washington area and plans to open offices in San Francisco, Dallas, New York, Paris, London, Sydney, Sao Paulo and Singapore in the next 18 months. The firms added that Avanade is expected to hire 3,000 technologists within the first 24 months under a pact providing for Microsoft to contribute $385 million cash.

Microsoft said it will also provide technological development support and other intellectual capital. Andersen Consulting stated it will provide intellectual capital, training, resources and solutions development for Avanade.

Andersen estimates that the market for type of services provided by Avanade could reach $15 billion by 2002.

Andersen’s Aggressive Approach to E-Commerce

While Microsoft is moving aggressively to build relationships for Windows 2000, Andersen Consulting is also making strong moves in the world of e-commerce. Last month, Andersen announced the creation of a global network of 17 e-commerce “launch centers,” where it plans to provide Internet start-up companies with the tools and counsel needed to quickly become viable, revenue-producing businesses.

Andersen said it intends to invest up to $1.2 billion in approximately 500 companies over the next three years. The plan calls for Andersen to nurture young companies that already have a nucleus of management and $1 million to $2 million in financial support.

That announcement followed a December announcement from Andersen about the creation of its own venture capital fund, which will invest up to $1 billion in Internet start-ups over the next five years. For the past two years Andersen has made investments in more than 175 dot-com companies.